Kaliningrad Offers Tax Breaks to Attract Bitcoiners

Crypto regulations have not been adopted in Russia yet, but a string of words and deeds suggests that Moscow may take full advantage of the “phenomenon” in order to uphold national interests. Ideas and proposals to attract businesses and human capital in areas of strategic importance across the vast country have been circulated by officials on local and federal levels. President Putin himself says lagging behind is not acceptable, as it carries “risks of losing sovereignty”.

Preferential Treatment Costs Just ₽1 Million

Any mining company can win support from authorities in Kaliningrad Oblast, if it invests as little as 1 million rubles, about $17,000 USD. Crypto miners willing to set up their facilities in the westernmost Russian region have been offered preferential treatment in the Special Economic Zone there. Tax breaks on profits and property and lowered benefit payments are among the incentives enjoyed by residents of the zone, according to Alexandr Shenderyuk-Zhidkov, Deputy Prime Minister of the Oblast.

Furthermore, local authorities are planning to minimize expenses for connecting mining farms to the power grid and other relevant infrastructure, Zhidkov said during the “Crypto Environment” conference in Moscow. The forum was sponsored by Vnesheconombank, Russia’s development institution. Recently, Kaliningrad governor Anton Alihanov said the region might become “one huge mining farm”. At the Investment Forum in Sochi, Alihanov revealed that a “mining hotel” was already operating in the Oblast.

The exclave of Kaliningrad is situated almost in the heart of Western Europe and is separated from the rest of Russia. The city and the region have always been strategically important for Moscow, since they became part of the Soviet Union at the end of World War II. The Russian Baltic Fleet is headquartered in Kaliningrad. Amid tensions with the West over Ukraine, Syria and the American interceptor missile launchers in Eastern Europe, Russia has reportedly deployed its nuclear-capable Iskander system in the region. The missiles can potentially reach Berlin.

Bitcoins to Attract Russians to the Far North

Crypto miners have also been invited to settle in the Far North of Russia. There are a lot of places in the country that can be extremely inhospitable, especially during the long Russian winter. Low temperatures, however, actually benefit cryptocurrency mining. The hardware used to process crypto transactions needs serious cooling. Murmansk is one such place, which offers not only cold climate, but very cheap electricity, as well.

Living and working within the Polar Circle has never been popular with most Russians. Back in Soviet times, workers were enticed to relocate there with higher wages and improved living standards. In modern Russia bitcoins may replace rubles as the major incentive for both businesses and people moving north.

Last month Russian Deputy Energy Minister Vyacheslav Kravchenko advised crypto companies to build mining farms on the Kola Peninsula in Murmansk Oblast, where they can find a surplus of power generating capacity. Kravchenko also noted his department’s positive attitude towards mining in Siberia, where electricity rates are low, too.

Analysts say the exploration of the Arctic will become a priority for global powers struggling to control depleting natural resources. In that respect, the importance of outposts like Murmansk may increase, both in terms of human presence and availability of well-maintained infrastructure. The Oblast is also home to Russia’s Northern Fleet.

South and Far East Covered As Well

Other important regions, from national security standpoint, have also received attention as possible destinations for crypto development. Following its internationally unrecognized annexation by Russia, Crimea has been sustained economically by the federal budget. As part of the efforts to support its development, proposals have been made to turn it into a testing ground for crypto technologies. The Russian Association of Cryptocurrency and Blockchain has been working on a roadmap to implement the “Crypto-Crimea” plan. Russia’s Black Sea Fleet is stationed on the south-west coast of the peninsula.

The city of Vladivostok, administrative center of the Far Eastern Primorsky Krai, has been mentioned as a future “crypto hub”, a place to build Russia’s new “crypto valley”. Representatives of the Fund for Development of the Far East, the Central Bank and government officials recently discussed a local initiative to allow crypto trade there. Vladivostok is located around the Golden Horn Bay, close to the borders of China and North Korea. It is the home port of the Russian Pacific Fleet.

In his annual address to the Federal Assembly of Russia, President Vladimir Putin said: “We have to formulate our own digital platforms, compatible with the global information space, of course. This will allow us to organize production processes, financial and technological services in a new way, including through the implementation of the distributed ledger technology”. “It’s about technology development. Lagging behind in this area is unacceptable – it carries risks of losing sovereignty”, Russia’s head of state warned. This month Putin is running for his fourth term in the Kremlin.

Do you think Russia is deliberately trying to direct crypto development toward areas with strategic importance? Share your thoughts in the comments section below.